SALARY SURVEY

Published on December 02, 1996.

If raises and bonuses are measures of advertising agency confidence in the nation's business climate, then confidence is running high these days.

Raises for the coming year will be at least a percentage point higher than in '96, and bonuses for this year, from CEO to account exec, will rise at least two points higher than '95, according to the fifth annual salary survey prepared by Altschuler, Melvoin & Glasser for Advertising Age.

Specifically, raises will run between 6% and 8% for seven surveyed positions at ad agencies, and bonuses will hover around 10% of base pay except for CEO and creative director, whose bonuses will average a healthy 34% and 21% of base pay, respectively.

BIGGER BONUSES AT MARKETERS

A tandem survey finds marketers can expect smaller pay raises for four key positions in their marketing departments, from 4% to 9%, but larger bonuses, from 14% to 26%.

Agency results support trends of previous years, from agency demographics to conclusions. The sample covers 203 agencies: 37% in the Midwest; 24% East; 22% South and 16% West.

Just under three-quarters of the surveyed agencies are recording gross income up to $3.6 million and 76% of those shops are from the Midwest. Gross income is agency parlance for revenue and is the sum of media commissions, fees and markups on materials and services.

Agencies in the next rung-$3.7 million to $7.5 million gross income-account for 16% of participating agencies. The next level-shops $7.6 million to $15 million gross income-claim 6% of responses. Larger agencies are minimally represented in the data.

TYPICAL OF GENRE

This profile is typical of the ad community as a whole, where agency gross income and billings are concentrated in the mega ad organizations and most employees are in small shops.

Given industry variables like agency size, regionalism and gender differentials, any mean carries a broad salary band. Statistical calculations (for a 95% confidence level) show the average agency CEO base salary to occupy a range of $8,600 plus or minus the mean. The confidence interval narrows as responses grow per post. The degree of accuracy for CD base salary is plus or minus $5,700; for senior account execs, $3,800.

The marketer's survey has fewer variables. It captures data from 13 national corporations and their subsidiaries, most with sales of more than $700 million.

Despite the smaller base, several key positions produce a mean bearing a high degree of accuracy. For example, a 95% confidence level calculated for VP-brand managers puts the mean within a range of $1,200, plus or minus. The mean for marketing VP falls within a $6,200 range, plus or minus.

STRONG RETURNS

Undergirding growth in base salary and performance pay at agencies are strong returns in gross income. For both 1995 and 1996, just over 50% of agencies say gross income advanced 5% to 10%-plus, with a quarter of the agencies experiencing growth up to 4.9%. Growth in the South and Midwest are slightly stronger than East and West.

Agencies are hiring. Some 53% (106) of the 202 agencies surveyed have net gains in employment this year. Thirty percent stayed the same.

EXPANSION AT ESSENCE

Of the 106 noting gains, most cite expansion in existing business as the reason.

Employment changes at creative and account management departments mirror each other: 47% of agencies increased employment in both, 13% decreased employment in both and 40% show no change in both. Creative departments are up more in the South, and account management, more in the West.

Media head count did not grow, and depending on how one looks at it, may be more damaging to women than men seeking media roles. This is an area women dominate (See story on Page S-8). At that department-head level, of 145 media directors in the survey, women number 106. Ironically, women media directors on a national basis draw 58% of what men are paid.

WOMAN DOMINATE AE AREA

Women also outnumber men nearly two to one as account execs, and they draw 87% of male AE base pay. Time in the position (generally favoring men) and probably vestiges of a glass ceiling conspire to produce these gender dynamics.

Employment in general is going up, regardless of gender. Nationally, unadjusted data from the U.S. Bureau of Labor Statistics indicate a steady rise in agency hiring from first quarter '95 employment of 153,400 to third quarter '96 at 174,100. Agency head count previ-ously fell from 1993 through 1994 (See chart on Page S-15). This year on an unadjusted basis, the top 30 U.S. agencies and their subsidiaries are advancing 8.2% in employment over '95.

The U.S. bureau will fine-tune these numbers in six quarters, and if adjustments in the past hold true, actual growth will be more like 4%-5%, third quarter to third quarter.

QUICK TO GROW

These top 30 agencies employ just under a quarter of all agency personnel.

Employment also is growing at a much faster clip on their consolidated side as opposed to their core level (see story on Page S-14). Specialty services, the growth quotient at most shops, are subsidiaries most typically found at the consolidated level.

Raises in '97 for agency personnel will be egalitarian. The CEO, though atop the raise scale at 8%, hardly dominates the scene. The CEO also is most likely to not get a raise-14% won't-than any of the other positions. This probably is more a factor of a "benevolent" CEO who owns the agency surveyed than any board action reflecting on the CEO's performance.

Raises vary by agency size and region. CEOs at agencies $7.6 million to $15 million gross income will see raises of 15%. Agency size, though, has little affect on the level of raises in other agency positions.

Creative directors will receive a 7% boost in base pay, although 5.4% of these executives won't receive a pay raise. For the remaining posts surveyed, raises will be either 6% or 7% with 3% to 2% not receiving a boost in base pay.

What CEO total remuneration lacks in raises, it gains in bonus. This top post will get a bonus that averages 34% of base pay, up from 32% last year. The CD will also be rewarded handsomely, at 21% of base pay compared with 14% in '95.

There is a regional bent to CEO bonuses: The South, where bonuses will average 57% of pay, pulls up the average. Elsewhere, bonuses average 31% of pay in the Midwest, and 23% each in the East and West.

ANNUAL REWARDS UP

Except for profit-sharing, other forms of "pay" are not prevalent among this set of agencies. The CEO is part of a profit-sharing plan among the 130 agencies answering the question on profit-sharing. Of the same set, 90 exec VPs and 75 senior VPs received the benefit.

Although onetime awards for VP and manager-level employees are not the norm-98 of 154 agencies responding to the question don't have them-they are expanding slightly. Of the 56 indicating such awards exist at their agency, four agencies say they are new in '96.

Stock ownership is creeping slowly into the VP and manager-level ranks. Albeit, most agencies either don't have stock or don't offer ownership plans, but of the 30 having such plans, 12 say they are new in '95-'96.